## Facts

- National Eastern Corporation (National) was a subcontractor on the Tomlinson Bridge construction project in New Haven, Connecticut, and had to supply materials meeting the project’s Type 316 stainless steel specification.
- In September 2001, National contracted with Vegas Fastener MFG (Vegas) to buy various steel materials (including nuts and bolts) specified as Type 316 stainless steel.
- Vegas provided two certificates stating the materials met the Type 316 specification and included test results supporting that certification.
- National accepted and used the materials on the project.
- After the project’s completion, testing revealed that most of the materials were Type 304 stainless steel rather than Type 316.
- The materials corroded and failed to meet the Connecticut Department of Transportation’s specification for the project.
- The project owner required removal and replacement of the nonconforming materials with Type 316 products.
- The general contractor (Cianbro Corporation) paid for the replacement work and then sought to recover those costs from National through back charges in an arbitration.
- An arbitrator awarded Cianbro $98,146 in back charges against National.
- National notified Vegas after discovering the nonconformity and later sued Vegas in federal court (diversity jurisdiction) for breach of contract and bad faith.
- National moved for summary judgment, seeking a ruling that Vegas breached the contract and that National’s claimed damages flowed from that breach.
- Vegas opposed summary judgment, arguing (1) the timing of National’s notice was a fact question under UCC § 2-607, and (2) National could not recover without meeting UCC § 2-608’s “substantial impairment” standard.

## Issues

1. Whether Vegas breached the sales contract by supplying nonconforming goods (Type 304 instead of the specified Type 316) despite providing certificates of compliance.
2. Whether National, as a buyer that accepted the goods, gave timely notice of breach within a reasonable time after discovery as required by UCC § 2-607(3)(a).
3. Whether UCC § 2-608’s “substantial impairment” requirement for revocation of acceptance limits a buyer’s ability to seek damages for accepted, nonconforming goods.
4. Whether National was entitled to summary judgment on the amount of recoverable damages, including the downstream arbitration back-charge award.

## Decision

- The court granted summary judgment for National on breach liability because the undisputed record showed the contract required Type 316 steel and Vegas supplied mostly Type 304.
- The court held National satisfied UCC § 2-607(3)(a)’s notice requirement for purposes of summary judgment because Vegas did not offer evidence disputing that Vegas received notice within a reasonable time after National discovered the nonconformity.
- The court rejected Vegas’s argument that National had to satisfy UCC § 2-608’s “substantial impairment” standard, treating National’s claim as one for damages for breach after acceptance (not revocation of acceptance).
- The court denied summary judgment to the extent National sought a final determination of all damages on the existing record, leaving further proceedings to resolve the amount and any remaining disputes tied to particular damage components.

## Legal Principles

- Under UCC Article 2, a seller breaches a sales contract by tendering goods that fail to conform to contract specifications or descriptions.
- A buyer who accepts goods must notify the seller of breach within a reasonable time after discovery (or when it should have discovered the breach) to preserve remedies. UCC § 2-607(3)(a).
- On summary judgment, a party opposing the motion must come forward with evidence creating a genuine dispute; argument alone, without supporting evidence, does not create a triable issue on a required element such as notice.
- A buyer may seek damages for accepted, nonconforming goods under UCC § 2-714 and may seek incidental and consequential damages under UCC § 2-715 when the required proof is made.
- UCC § 2-608’s “substantial impairment” requirement applies to revocation of acceptance and does not function as an added prerequisite to a buyer’s post-acceptance damages claim under §§ 2-714 and 2-715.
- Even when breach is established as a matter of law, summary judgment on the full amount of damages may be denied where the record does not resolve disputes about causation, allocation, or the amounts tied to particular loss items.

## Conclusion

The district court held that Vegas breached the contract as a matter of law by supplying mostly Type 304 steel instead of the specified Type 316 and that National’s notice of breach satisfied UCC § 2-607 for summary-judgment purposes because Vegas provided no evidence to the contrary; however, the court refused to impose § 2-608’s “substantial impairment” requirement on National’s damages claim and denied summary judgment on the complete measure of damages, leaving the amount for further proceedings.


National Eastern Corp. v. Vegas Fastener MFG, 59 UCC Rep. Serv. 2d 330 (2006)